The Lockheed Martin division counts on the FAA for most of its business, Gan acknowledged. But she pointed out that the company will maintain a hefty stake in the air traffic control industry, with a current $898 million contract to modernize another component of the nation's system.

Winning the contract could have meant adding workers to the 1,500 now employed by the division in Rockville and at several smaller sites in other states, Gan said. Losing it probably won't mean any cuts, she said, "but it's really too soon to tell. We will do some reevaluating, certainly, in the weeks and months ahead."

Raytheon and Lockheed Martin "may have switched between being No. 1 and No. 2" in the U.S. air traffic control industry,

said Brett Lambert of DFI International, a Washington defense and aerospace consulting firm.

The Massachusetts-based Raytheon has been more prominent in foreign markets such as Canada, Germany and Norway, where its AutoTrac system has an excellent track record, Lambert said.

The Lockheed Martin division actually had the contract for the U.S. system several corporate owners back, when it was a division of IBM, and then of Loral. But the government decided to revamp the three major components of the national air traffic control network and put them out for new bids.

Lockheed Martin won the job of revamping one component, the en route system, a network of 21 centers around the country that tracks airliners in the vast spaces between airports. That is the $898 million contract now under way. The first revamped center is to be completed in 1998, Gan said, with the rest to follow over the next several years.

The job Raytheon won yesterday, beating out not only Lockheed Martin but also the less experienced Boeing Corp., was for the air traffic control system in the terminal area, or within 50 or 60 miles of an airport.

Raytheon will supply systems for up to 172 airports overseen by the FAA and 199 facilities under the Department of Defense. The first is to enter operation in Boston by 1998, and the rest will come online through 2007.

Lockheed Martin is currently working on some aspects of the third component of the air traffic control network, Gan said, the tower system. Computers in airport towers track planes around the runways and as they take off and land.

But the loss of the terminal contract had to be "a major setback and disappointment" for Lockheed Martin, Lambert said. "I would have considered Lockheed Martin the incumbent in this case."

Even so, air traffic control is just one division of Lockheed Martin, the country's biggest defense contractor. Raytheon has staked a large portion of its business on air traffic control, Lambert said, and claims to supply over a third of the world market.

"So Raytheon obviously sees this as a core growth area of the corporation, rather than as a division. I think that may have had some role," he said.

Gan said Lockheed Martin now will concentrate on completing its work for the en route contract, on gaining work with tower systems and in seeking business overseas.

The new system Raytheon will install -- called the Standard Terminal Automation Replacement System, or STARS -- will include color display monitors to replace the green-on-black images of the current, 20-year-old equipment.

Transportation Secretary Federico F. Pena yesterday hailed the contract as "further evidence of our commitment to modernize our nation's air traffic control system to ensure that we are ready for the challenges of the 21st century."